Customs duty hiked by 8

In keeping with the GATT commitment the government proposes to reduce Customs duty on crude from 27 per cent to 22 per cent 8211; a revenue loss of Rs 965 crore per year. To offset that the excise duty on motor spirit will go up from 20 to 35 per cent and the duty on kerosene imported for parallel marketing to 32 per cent.

The new across-the-board 8 per cent import duty is expected to hit the consumer goods and consumer electronics sectorsbadly 8211; especially television and refrigerator companies that rely on imported components. Products that are indigenously manufactured are expected to gain. At the same time the Budget has reduced excise duty for local manufacturers of electronic calculators from 18 per cent to 8 per cent and pagers from 18 per cent to 13 per cent.

The finance minister has made it clear that the duty should not be seen as a protection, but rather as a levelling of the field for domestic industry which pays a sales tax of roughly 8 per cent on all manufactures.

However, officials of the ministry of commerce estimate that the revenues on this account alone will not be very big, because it exempts crude oil, the largest item of import into India.

The Budget estimates that the net gain from the Customs duties will be Rs 3,304 crore while that from excise duties will yield Rs 5,009 crore.

Importers of gold will now pay a duty of Rs 250 per 10 gms, up from the Rs 220 per 10 gm till now.

The government has also increasedthe Customs duty on cold rolled coils of iron and steel from 25 per cent to 30 per cent to protect domestic steel manufacturers who have been slapped with anti-dumping duties in South Asia and Europe. The local textile industry has also come in for some respite with some of intermediaries for the textile industry coming down to the standard level of 25 per cent.

The other sector that will be affected is the auto sector. The Budget has recommended an increase in Customs duty on IC engines and motor parts from 20 per cent to 30 per cent. The government has also proposed the movement towards a mean excise duty 8211; an 8 per cent excise duty has been imposed on packaged tea, branded butter, cheese and ghee, sewing machines, branded spices, branded edible preparations, branded meat and fish preparations and skimmed milk powder.

To balance the increases in duties, the government has tried to provide reliefs in other sectors that have seen poor growth in the last year.

Accordingly, machinery for the leathersector will attract a duty of only 5 per cent compared to the existing 20 per cent, floppy drives and hard disk drives a duty of only 12 per cent down from 15 per cent.